Shares of contract electronics manufacturing services provider Fabrinet (FN) are down $3.11, almost 8%, at $36.71, after yesterday afternoon beating fiscal Q4 expectations but missing by a wide margin with its Q1 outlook, and announcing its board authorized buybacks of up to $30 million of its stock.

There are no ratings changes today, that I can see, though there are some price target cuts and estimate cuts. The bulls, and Street coverage is pretty much unanimously bullish, today posit that Fabrinet is bearing the burden of all of the numerous challenges of its fiber optics customers, challenges ranging from lack of telecom spending to slowdowns in China.

But the bulls argue investors should stay the course because the business is still quite promising.

The company "clearly has some key customers experiencing challenges,” writes Stifel Nicolaus’s Patrick Newton, who reiterates a Buy rating and sticks with his $48 price target.

Those include Lumentum (LITE) "with ROADMs,” and Acacia Communications (ACIA) with its "CFP/CFP2 DCOs."

And Fabrinet is "seeing headwinds from China – similar to the rest of the industry."

Newton is disappointed with the "slowing growth trends in the company’s “silicon photonics,” or SIP, products However, the company has "the right SiP customer base to accelerate growth in FY18 (focus on Intel (INTC) and ACIA) – assuming Cisco’s business is only a modest headwind."

"This combination, along with tailwinds from datacom and an increasingly diversified set of products and customers outside of optical communications, keeps us positive on the stock," he writes.

Newton lists some things he likes about the business trends:

QSFP28 revenue was noted to have increased roughly 50% sequentially to an estimated • $43 million. Overall 100G revenue totaled $159 million, increasing 7.4% q/q and 42% y/y. Fabrinet is beginning to see the benefit of 400G revenue which was noted to more than double sequentially to $18 million, or 5% of revenue.

Newton cuts his estimates for this fiscal year to $1.5 billion and $3.45 per share from a prior $1.54 billion and $3.65 per share.

Needham & Co.’s Alex Henderson reiterates a Strong Buy rating, and a $64 price target, writing that issues facing the company in SIP, and for “reconfigurable add-drop multiplexer,” or ROADM, products, are temporary, and “all of these should resolve relatively quickly and help Fabrinet return to strong double-digit growth in calendar 2018."

He notes that problems with Acacia in the SIP area are “well documented and should rebound as its new products kick in."

As for ROADMs, “there is no doubt demand for ROADMs should improve as metro core builds ramp-up,” writes Henderson, “and China is in the earliest stages of adopting ROADMs."

We expect ROADM demand in China to more than double in calendar 2018."

Henderson cuts his fiscal 2018 estimates to $1.55 billion in revenue and $3.59 per share in net income from a prior $1.59 billion and $3.75 per share.

Piper Jaffray’s Troy Jensen reiterates his Overweight rating on the stock, while cutting his price target to $51 from $55, writing that you should buy “weakness” in the shares, because the outlook is not as bad as some think.

The forecast was to be expected, writes Jensen, given problems of the fiber names like Lumentum, and “we would argue Fabrinet’s September quarter guidance of down roughly 3% sequentially is significantly better than most in the optical space and speaks to the company’s success at gaining market share, being in most of the better growth markets, and less overall exposure to China."

"We believe Fabrinet is positioned well for another great year and we believe 2018 will be the year Fabrinet experiences outsized growth in datacom sales given their traction going direct to Web 2.0 customers."

Jensen’s estimate for this fiscal year ending in June goes to $1.53 billion in revenue and $3.43 per share in earnings from a prior $1.62 billion and $3.88.

Facebook shares drop almost 7% on Friday's disclosure of mishandling of user data by the consulting firm Cambridge Analytica, KLA-Tencor buys fellow chip equipment maker Orbotech, Deutsche Bank analysts are bullish on fiber optics name II-VI but negative on Arista Networks, GrubHub stock is getting pricey according to Stifel analyst John Egbert, Fitbit finds a new believer in Craig-Hallum's Alex Fuhrman, ex-chairman Paul Jacobs of Qualcomm is hoping analysts will vote in sympathy with him at the company's shareholder meeting on Friday, Dell topped server sales in Q4 and bumped aside Hewlett Packard Enterprise, Google's Diane Greene is mulling a big acquisition to boost the company's cloud services, Apple is moving forward with its own display technology called "micro LED," and Oracle is set to report results after the closing bell.

"While it's background noise for investors in the near-term, with the News Feed overhaul and other actions that Facebook has implemented over the past few months, its clear with more 'heat in
the kitchen from the Beltway' that further modest changes to their business model around advertising and news feeds/content could be in store over the next 12 to 18 months," analyst Daniel Ives wrote.

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